Monday, May 19, 2014

Springtime for Bankers

By Paul Krugman

New York Times

By any normal standard, economic policy since the onset of the financial crisis has been a dismal failure. It’s true that we avoided a full replay of the Great Depression. But employment has takenmore than six yearsto claw its way back to pre-crisis levels — years when we should have been adding millions of jobs just to keep up with a rising population. Long-term unemployment is stillalmost three timesas high as it was in 2007; young people, often burdened by college debt, face a highly uncertain future.

Now Timothy Geithner, who was Treasury secretary for four of those six years, has published a book, “Stress Test,” about his experiences. And basically, he thinks he did a heckuva job.

He’s not unique in his self-approbation. Policy makers inEurope, where employment has barely recovered at all and a number of countries are in fact experiencing Depression-level distress, have even less to boast about. Yet they too are patting themselves on the back.

How can people feel good about track records that are objectively so bad? Partly it’s the normal human tendency to make excuses, to argue that you did the best you could under the circumstances. And Mr. Geithner can indeed blame much though not all of what went wrong on scorched-earth Republican obstructionism.

But there’s also something else going on. In both Europe and America, economic policy has to a large extent been governed by the implicit slogan “Save the bankers, save the world” — that is, restore confidence in the financial system and prosperity will follow. And government actions have indeed restored financial confidence. Unfortunately, we’re still waiting for the promised prosperity.

Much of Mr. Geithner’s book is devoted to a defense of the U.S. financial bailout, which he sees as a huge success story — which it was, if financial confidence is viewed as an end in itself.Credit markets, which seized up after Lehman fell, mostly returned to normal during Mr. Geithner’s first year in office.Stock indexesrebounded, and have hit new records. Evensubprime-backed securities— the infamous “toxic waste” that was poisoning the financial system — eventually regained a significant part of their value.

Thanks to this financial recovery, bailing out Wall Street didn’t even end up costing a lot of taxpayer money: resurgent banks were able to repay their loans, and the government was able to sell its equity stakes at a profit.

But where is the rebound in the real economy? Where are the jobs? Saving Wall Street, it seems, wasn’t nearly enough. Why?

But fiscal austerity wasn’t the only reason recovery has been so disappointing. Many analysts believe that the burden of high household debt, a legacy of the housing bubble, has been a big drag on the economy. And there was, arguably, a lot the Obama administration could have done to reduce debt burdens without Congressional approval. But it didn’t; itdidn’t even spend fundsspecifically allocated for that purpose. Why? According to many accounts, the biggest roadblock was Mr. Geithner’s consistentopposition to mortgage debt relief— he was, if you like, all for bailing out banks but against bailing out families.

“Stress Test” asserts that no conceivable amount of mortgage debt relief could have done much to boost the economy. But the leading experts on this subject are the economists Atif Mian and Amir Sufi, whose just-published book “House of Debt” argues very much the contrary. On their blog, Mr. Mian and Mr. Sufipoint outthat Mr. Geithner’s arithmetic on the issue seems weirdly wrong — order of magnitude wrong — giving much less weight to the role of debt in holding back spending than the consensus of economic research. And that doesn’t even take into account the further benefits that would have flowed from a sharp reduction in foreclosures.

In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the people who lent them money. But when crisis came, bankers were held harmless for their errors while families paid full price.

And refusing to help families in debt, it turns out, wasn’t just unfair; it was bad economics. Wall Street is back, but America isn’t, and the double standard is the main reason.

About Me

Right To Share Food
At Right To Share Food, we believe that sharing food with our brothers and sisters is a fundamental human right. We believe that sharing food is a constitutionally protected activity, guaranteed under the freedom of association clause of the first amendment of The Constitution of the United States of America. We believe that sharing food outside and in public is an equally protected activity. Our goal is to promote cooperation among people in order to exercise and defend this right.
Hello; let me introduce myself. My name is Michael Hubman. I am the founder and the facilitator of Right To Share Food. Since 2007 I have been lobbying on behalf of the human and civil rights of homeless people. I operate Watercorps, a charity that gives bulk drinking water to the homeless people living on the streets of Skid Row Los Angeles.
Conflict occurs when government, most often municipalities, attempt to effect social engineering by restricting or forbidding the sharing of food on public property, the commons and even private property.
Michael “Waterman” Hubman
http://righttosharefood.org